Average closing cost estimates

You hunt for weeks and find a house that fits your pocketbook and your dreams and sit down with a real estate agent to talk numbers. Suddenly you learn that what seemed like a simple matter of down payment has turned into a larger expense than you realized because of closing costs.

Real estate closing costs vary by state, town, even neighborhood. All the players in your home-buying process can affect your fees. Orienting yourself about fees empowers you with information to ask the right questions before signing a contract.

In general, expect 2 to 4 percent of the house cost as closing costs. For a $150,000 house, that amounts to $3,00 to $6,000. You need to know what makes the cost $3,000 and what makes it $6,000.

Property Taxes

Your property taxes are prorated based on the number of months remaining in the year. The taxes owed before your closing date are the responsibility of the previous owner. Your mortgage company usually requires that several months' worth of taxes be held in escrow to provide a cushion for tax assessments and changes. You may ask your lender if you can pay your own taxes when they come due each year instead of having them collected monthly and held by the mortgage company.

Hazard Insurance

A homeowner's policy covers both you and the mortgage company in case of damage. Deductibles can adjust the bottom line on your annual premium just like car insurance. Shopping for insurance companies can alter the cost as well.

Title Insurance

Title insurance covers you and the mortgage company in case the title of the property is flawed. This coverage takes care of your indebtedness in case the history of the property causes some question about your deeded rights. The rate is based on the mortgage amount and your area, and can be several hundred dollars.

Mortgage Insurance

This insurance covers your lender in case you default on your loan. It is a requirement on conventional loans where you pay less than 20% down payment. The rate is up to 1% of the loan, and several months' premium is collected in advance like property taxes. Pay more than 20% down payment and this requirement may be waived.

Pest Inspection

The house must be inspected for pest infestation and damage. Expect $50 to $200. Shop companies for the best fee.

Structure Inspection

Buyers pay for house inspections to check for damages or judge future repairs. Costs go from $100 to $200. But you may also need separate tests run for water quality, septic tank soundness, radon, or asbestos. Each can run $20 to $400. Shop around.

Appraisal Fee

This fee is the cost of determining the value of the property based upon recent sales in the area. The cost ranges $250-$500. These fees rarely change between appraisers unless you have a large or uniquely shaped property.

Survey

If the lender requires a new survey, the buyer usually pays for this expense. The design and style of the property determine this fee.. A simple lot may run $300 while rural acreage with angles can run $2,000. Shop surveyors. You can often save by using the surveyor that prepared the last survey on the same property.

Loan Origination Fee

The lender's cost for establishing a new loan is often charged at 1 to 3% of the loan. Shop lenders to get the best rate.

Prepaid Interest

Interest from the closing date to 30 days prior to the first payment must be collected. At most, this amount is 30 days of interest. Set the closing date to enhance this figure to your advantage.

Credit Report

The mortgage company's cost of checking your credit history - usually $50 to $60. You have no choices on this cost.

Tax Service Fee

This is the expense of checking outstanding taxes due on the property. No options on this fee of about $70 to $100.

Underwriting Fee

This is a mortgage company charge. Some lenders do not charge this and others may charge as high as $500. Shop for your lender.

Miscellaneous Fees

Overnight express, copies, couriers, and other odd fees fall in this category. Long distance deals, power of attorney, and rushed closings all contribute to higher fees.

Attorney Fee

Expect at least $400 and up to $1,000. You choose the attorney so make several calls to get the best rate. Any complications or unusual lending or sales arrangements can raise the rate.

Recording Fees

These fees vary widely depending upon the loan, the appraised value, the number of pages of recorded documents, and the recording rates of the region. Expect under $100 and usually under $50 if you have an uncomplicated closing.

Remember most items are negotiable, too. Being knowledgeable aids you in making the best choices about closing costs.